The No. 1 rule when it comes to craft brewing

Published 9:22 AM ET Tue, 1 Dec 2015
CNBC.com

Don't quit your day job ... yet. Or, at least wait until you talk to Carol Roth, a small-business advocate, "recovering" investment banker, and author of "The Entrepreneur Equation." In a new digital series, Roth takes on would-be entrepreneurs who want to abandon their careers for new small-business ideas. Here, she analyzes Jayson Dayton, the CEO of Lionheart Cider, a hard-cider maker started by Dayton and his fellow students as a class project while in business school at the University of Minnesota. Dayton received a job offer to work at a large multinational food company after graduation but after a few months opted to focus full time on Lionheart. Quitting his day job is no longer an issue so, the question is: How does he make it work?

In the past, brands were considered successful when they had mass appeal — meaning that they were sold everywhere and available to everyone. But times have changed, and with people overwhelmed by information and messaging, it is harder to grab mindshare and loyalty. That's why creating a community of enthusiasts who are passionate about your product is a sound strategy for success.

One of the most successful industries to have developed from leveraging the enthusiast is the craft beverage industry. That's why I told Jayson Dayton, the CEO of Lionheart Cider in Minnesota, that he needs to stay focused and create that fierce loyalty on a local basis.

Lionheart has gotten some traction with a distributor — so much so that they had to ask the distributor to stop adding new customers for a little while because they were having a hard time keeping up with demand!

The distributor has said that it can take Lionheart to markets outside of Minnesota, such as the West Coast.

That may sound great for demand and growth — but I think it would be a mistake.

The most important rule for virtually all of the dominant players in craft beer or cider is that "local always wins." So, what Dayton and Lionheart need to do is dominate the Minnesota market first — be the home-team cider of choice — before they even think about entering another market. That's no easy task, but it will be a key to their success. They need a clear focus and path.

Every moment of his staff's time and their resources have to be spent on dominating the Minnesota market until they have far and away the No. 1 position in Minnesota. This makes sure that he is supporting the sell-through of the cider in one location, which is much more viable than trying to do that in many markets simultaneously.

It also is easier to cultivate a community when everyone in the community shares the same affinity to the home location.

A few other pieces of advice: 1) They need to think about owning their liquid. Currently they are outsourcing production of the cider – but that creates a perception problem with enthusiasts who value the company-made aspect of a craft beverage. 2) They need to raise their price point. The current suggested retail price is $7.99 to $8.99 for a four-pack of 16-ounce cans. Craft beverages that are premium in quality should have a corresponding premium price. I think $10.99 would be in the sweet spot.

Given that Dayton and his cohorts have already left school and jobs behind, I can't prevent them from quitting their day jobs. But they need to stay focused and establish a clear path to make the business work.

If you're an entrepreneur looking to turn your hobby or "jobbie" into a full-time career, we want to hear from you. Email: AskCarolRoth@cnbc.com.

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